Company Law

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Company Law by Mind Map: Company Law

1. Corporate Fraud

1.1. Fraudulent and Criminal Behaviour

1.1.1. SECURITIES AND FUTURES ACT INSIDER TRADING: the use of price sensitive information obtained by virtue of position not available to the public when dealing with securities - Trading offence: Connected person/Insider does so - Procuring offence: Connected person/Insider procures someone to do so - Communication offence: Connected person/Insider communicated information not generally available and would have material effect on price of securities to someone else. This person is also likely to buy/sell Connected person: Officers of company and business relationships Insiders: Not connected person but posses inside information and know the nature of info they possess Criminal penalty: Fine up to $250,00 and/or imprisonment up to 7 years

1.1.1.1. FRAUDULENT BEHAVIOUR: Lifting of the corporate veil and responsible person(s) held personally liable

1.1.1.1.1. FALSE TRADING & MARKET RIGGING Creation of false of misleading appearance or active trading or wrt price on market affecting the price of securities by way of buy/sell not involving change in ownership or any fictitious transactions or devices - Stock market manipulation: person shall not make 2 or more transactions including ITT with intent on to induce others to buy/sell - Dissemination of False Information: Prohibited to induce others to buy/sell - Employment of Manipulative or Deceptive Devices: to defraud buy/sell, engaging in any act or making untrue statements

2. Winding up and Corporate Rescue

2.1. Winding Up

2.1.1. SCHEME OF ARRANGEMENT RECEIVERSHIP JUDICIAL MANAGEMENT COMPULSORY/VOLUNTARY WINDING-UP

2.1.1.1. 1. Scheme of arrangement: Proposed by insolvent company and apply to court. Meanwhile company can apply for suspension of legal proceedings against the company. 75% of creditors agree and court approves. 2. Receivership: Creditor based on a charge created earlier, appointing someone to liquidate a number of assets necessary to pay up the creditor

2.1.1.1.1. 3. Judicial Management: Focuses on giving company a second chance for survival rather than the needs of a creditor. No legal action to be taken during this time. - Company protected from forced liquidation - Unsecured creditors benefit as rehabilitation of company may allow company's assets to be sufficient to pay off debts Appointment: Applied by company/creditor(s). Company held an AGM with ordinary resolution. Approved by court only when - Company unable to pay its debts - Order will achieve survival as a going concern - More advantageous realisation of assets than winding up Effect: Takes fiduciary duty for all properties of company. Becomes BOD, can call for creditors meetings but not EGM. Agent of company.

3. Minority Protection

3.1. Minority Rights

3.1.1. PROBLEMS - Majority Rule: Shareholders control management of Directors through threat of removal (needs majority vote). Hence, only majority of AGM has advantage. The minority has no advantage. - Foss V Harbottle Rule: The proper plaintiff is the company itself. No individual member of company is allowed to maintain an action in respect of that matter (because it goes against the majority rule) - Separate legal personality of Company (Salomon V Salomon)

3.1.1.1. SOLUTIONS (MINORITY PROTECTION) 1) Exceptions to Foss V Harbottle Rule: Special resolution needed to ratify, Illegal Act (ultra vires), Oppressive Acts (lawful but discriminatory), Fraud on the minority Ebrahimi V Westbourne 2) Derivative action (S216): Suing on behalf of company 3) Personal remedies: -Suing for infringement of members rights (court order for share buy back) - Just & Equitable Winding up as a last resort

4. Capital and Financing of Companies

4.1. Share Capital

4.2. Loan Capital

4.3. Creditor protection

5. Formation and Constitution of Business Organisations

5.1. Partnerships

5.2. Sole Trader Unincorporated Firm

5.3. Companies

5.3.1. PRE-INCORPORATION CONTRACTS REGISTRAR

5.3.2. CONSTITUTION Document of the company, contract between members and the company. Bound by contract once you buy shares. - The name of the company - "Liability of members is limited", by shares or guarantee - Initial capital structure, details of initial subscribers, no need to include par value of a share or the division of a share - Rights and obligations of the company and members

5.3.2.1. OBJECTS CLAUSE & ULTRA VIRES & POWER OF COMPANY Objects clause: Lists business purpose of company Power and capacity: Ability of the company to achieve the objects Ultra Vires: When the company does something beyond its objects and powers, contract is void. Problems of Ultra Vires: - Objects clause used to be unalterable or only in limited circumstance - Registered companies do change their central nature of business, unlike public bodies - Doctrine of constructive notice+Ultra Vires doctrine=unwary/innocent 3rd party with unenforceable contracts Solutions by Companies Act- Power of company: - S23, the company has unlimited power and full capacity unless restricted by "objects clause" (now OPTIONAL) - S25 no act of a company is invalid solely because a company lacks capacity to undertake the act

5.3.2.1.1. LIMITED Limited by Shares: - Issue prospectus - Shares issued to public - Shares must be transferable - Members liability limited to the amount unpaid on the shares Limited by guarantee: - Members liability limited to the amount they guaranteed

6. Management of Companies

6.1. Company directors

6.1.1. ROLE AND AUTHORITY

6.1.1.1. 1) Directors are agents of the company 2) Types of directors - Executive: management responsibilities, Non-Executive: not involved in daily management - Alternate/Substitute - Shadow: instructs/directs directors to act - De Facto: not formally appointed but functions like one

6.1.2. REMOVAL AND APPOINTMENT

6.1.2.1. REMOVAL Pte: Ordinary resolution unless otherwise stated in constitution Ltd: Ordinary resolution+Special notice Appointment: Pte and Ltd: Ordinary resolution, for Ltd unless otherwise stated in constitution

6.1.3. DUTIES Common Law: Equity, Fiduciary duty and COI Statutory Law: S156 (COI) and S157

6.1.3.1. HONEST AND BONA FIDE Act in interest of company (subjective) REASONABLE DILIGENCE, DUE CARE Objective Standard of due care test CONFLICT OF INTEREST Must be avoided by disclosing any interests in transactions and board must approve (shareholders V directors) POWERS FOR PROPER PURPOSES Use information and position to act for company, not for shareholders (shareholders V company)

6.2. Other Company Officers, Promoters

6.3. Company meetings and resolutions

6.3.1. MEMBERS MEETING 1) Statutory for Ltd: held 1-3 months after incorporation, directors must convene, forward statutory report to registrar and all members 7 days before meeting 2) Annual General Meeting: once a year compulsory for Ltd 3) Extraordinary General Meting: Class meeting, Notice and conduct of meetings (void by accidental omission of member), Public company meetings, Quorums of meetings, Conduct of meetings (Chairman)

6.3.1.1. RESOLUTION 1) Written resolution: Held instead of general meeting voting 2) Special resolution: 75% majority of those attended with special notice before meeting (reduce capital, amendment to constitution, winding up) 3) Ordinary resolution: 50% majority with ordinary notice before meeting (Director appointment and Removal) 4) Special notice: 21 days before meeting 5) Ordinary notice: 7 days before meeting

6.4. Authority Corporate Veil

6.4.1. AUTHORITY Actual authority: The authority actually exists Express authority: Verbally/Written consent by principle to agent Implied authority: Consent via conduct Apparent/Ostensible authority: 1) Company represented to 3rd party that director has authority to act 2) Representation made by company/BOD 3) 3rd party induced to enter contract as a result

6.4.1.1. CORPORATE VEIL (Lifting)- wrongdoers held personally liable for debts and liabilities caused by them: - Evading legal obligations or commiting Fraud (S340) (where statutory interpretation requires) - The (subsidiary) company is an agent of its (parent) controller - Company is a sham or façade - Where the court is required to apply equity (where justice of the case requires) - Group of companies displaying functional unity- of control and ownership